It comes just one day after WPP Group, the world's second-largest advertising and marketing conglomerate, said it would buy online advertising company 24/7 Real Media Inc. for $649 million. Microsoft had been widely seen as a potential bidder for 24/7.

"Today's announcement represents the next step in the evolution of our ad network from our initial investment in MSN, to the broader Microsoft network including Xbox Live, Windows Live and Office Live, and now to the full capacity of the Internet," said Microsoft Chief Executive Steve Ballmer in a statement.

The deal is expected to be completed in the first half of Microsoft's fiscal 2008. The acquisition is not expected to significantly impact the company's prior financial guidance.

With about 2,600 employees, aQuantive will continue to operate from its Seattle headquarters as part of Microsoft's online services business. The company, which operates marketing services firm Avenue A/Razorfish, reported 2006 profit of $54 million on sales of $442.2 million.

Shares of online ad company, ValueClick , soared more than $5 to $33 in premarket trading.